COLVIN + HALLETT BLOG

Need a PTIN or need to renew? Act quickly or you might be paying up again soon

by | Aug 9, 2017 | Tax Litigation, Tax Advice

On July 10, 2017, the U.S. District Court for the District of Columbia entered a permanent injunction prohibiting the IRS from charging a fee for the issuance and renewal of preparer tax identification numbers (PTINs), after concluding on June 1 that the IRS lacked statutory authority to charge such user fees. Steele, et al. v. United States of America, No. 14-cv-1523 (D. D.C. June 1, July 10, 2017). The Court also ordered the IRS to refund all PTIN user and renewal fees paid since the inception of the PTIN program. In response to the Court’s order, the IRS suspended its collection of PTIN user fees and issued a statement indicating it is working with the Department of Justice to determine how to proceed regarding the Court’s order to refund past PTIN fees paid.

By way of background, Steele consisted of a group of return preparers seeking class certification to challenge the imposition of PTIN user fees, and was spearheaded by Allen Buckley, an attorney who had initially brought the same challenge unsuccessfully for a client in the 11th Circuit Brannen case and on behalf of himself in the Northern District of Georgia Buckley case. Brannen v. United States, 682 F.3d 1316 (11th Cir. 2012); Buckley v. United States, No. 13-cv-1701 (N.D. Ga. December 4, 2013). Although the D.C. District Court declined to hold that the IRS could not require preparers to obtain a PTIN, the Court agreed with the plaintiff preparers that the IRS lacked statutory authority to charge PTIN user and renewal fees. The Steele decision has no doubt left the government reeling/scampering around to determine the continued viability of its preparer regulation programs, particularly given that this is the second blow to its preparer regulation activities after the Court, in Loving, held the IRS’s tax return preparer registration program was invalid and enjoined the IRS from further administering it. Loving v. IRS, 742 F.3d 1013 (D.C. Cir. 2014).

To address the immediate ramifications of Steele, the government has now moved for a stay of the PTIN fee injunction in a motion it filed with the D.C. district court on July 24, 2017. The government asked for a stay of the injunction while it determined whether to appeal the Court’s decision and during any appeal. In its memorandum, the IRS asks the Court to lift the injunction because the government would be significantly harmed in the likely event it prevails on appeal because it would forever have lost out on “likely tens of millions of dollars” of PTIN fees not collected during the pendency of the appeal. The government pointed out that, if it did not prevail on appeal, the PTIN fees could simply be refunded along with the other PTIN fees collected in prior years.

The government expressed continued confidence in its position that it has sufficient statutory authority to charge PTIN user and renewal fees, citing the 11th Circuit’s decision in Brannen and the Northern District of Georgia’s decision in Buckley as further authority for its position and likelihood to prevail on appeal. The plaintiffs responded to the government’s stay request on August 7, arguing that the motion was procedurally improper, that the IRS did not meet its burden to show that a stay is warranted or that it has a likelihood of prevailing on the merits on appeal, and finally that the government will not be irreparably harmed without a stay.

While it remains to be seen whether the government will prevail on appeal, it is possible that the Court will agree with the government that it can continue to charge PTIN user and renewal fees while the case is appealed and will lift the injunction. If that is the case, those needing to obtain or renew PTINS may want to renew during this interim period while the IRS is prohibited from charging user fees.

 

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